Employees can interview for jobs with new owner

Officials with the Memphis-based Kroger Delta Division announced that eight area Schnucks stores will be converted to Kroger sites during the next few weeks.

After nearly a decade in Memphis, Schnucks has left the building.

Or buildings.

Ending weeks of speculation, company officials confirmed today that the St. Louis-based chain's area footprint will be resold under the Kroger brand.

Terms of the deal were not disclosed.

"This was a difficult decision, but as a company of 15,000 teammates, we have an obligation to look to the future. Unfortunately, that means making tough decisions in order to keep our company strong and to continue serving customers and providing careers down the road," said Scott Schnuck, chairman and CEO.

"While it saddens me to announce our departure from the Mid-South, I can honestly say that I believe our presence here has had a positive affect on the market. Over the years, Schnucks invested heavily in our stores and in our teammates and stirred local competition to step up their games in terms of food expertise and service. Customers across the region will benefit from that work even after we've moved on."

Officials with the Memphis-based Kroger Delta Division announced that eight area Schnucks stores will be converted to Kroger sites during the next few weeks.

As part of the deal Kroger also purchased the Collierville Schnucks at 275 New Byhalia, but it is near a recently renovated Kroger and so company officials have opted to close the store. Plans are to lease it to another retailer.

Three other Schnucks stores that are in leased properties will also close.

"For over 60 years, Kroger has proudly served the Memphis community," said Mark Prestidge, Kroger Delta Division president. "Kroger has demonstrated its commitment to the Memphis area by investing over $70 million on remodels, expansions and fuel centers over the last five years. We continue to focus on upgrading our store base in an effort to provide our customers the best shopping experience possible. With this acquisition, we are pleased to be able to provide more convenient locations for our customers to shop at in the Memphis area."

Kroger counts 37 stores in the Memphis area and this deal will boost that number to 43. Two of the stores will replace smaller Kroger stores.

"We plan to convert these stores and re-open within two weeks after they close. Our primary goal is to minimize the inconvenience to our customers as we transition the stores to Kroger," Prestidge said. "While the acquired stores will be temporarily closed during the conversion process, the pharmacies and in-store banks will be accessible and remain open to customers during regular business hours."

Pharmacy customers at the Schnucks stores that are set for permanent closure will be able to fill prescriptions at the nearest Kroger.

The overlapping of Kroger stores that the purchase seems to create in several areas had Art Seessel confused.

He was CEO of the Seessel's grocery stores until they were sold in 1997, and remains the landlord for the Schnucks buildings on Perkins in East Memphis and on Union in Midtown.

Kroger just spent millions of dollars renovating its Mendenhall store in East Memphis, which is close to the two Schnucks stores it just bought on Perkins and Truse Parkway.

The purchase also seems to create geographic overlap for existing Kroger stores in Bartlett and Germantown, said Danny Buring, managing principal of The Shopping Center Group.

"I think there will be an opportunity for another major player to step in," Buring said.

But Kroger has a history of being aggressive in the Memphis market, he added.

"The grocery market has been pulled from both ends," Buring said. "From the low end with expansion of Aldi and Save-A-Lot and on the higher end with Fresh Market and Whole Foods. But Kroger has always maintained its dominance here. While they don't have the market share they had 15 years ago, I can't imagine there's a whole lot of other markets where they have this kind of dominance."

Last year, Kroger announced plans for a $20 million construction project near its Poplar and Highland location, resulting in a new 87,000-square-foot grocery situated just west of its current site at 3444 Plaza Ave. But the project has yet to begin because tenants remain at the site where Kroger plans to raze existing structures and build from the ground up.

The project is expected to take up to a year to complete and calls for a new grocery that will be about 30,000 square feet larger than the Kroger currently at the site.

Thirty associates will be added, increasing its employee count to 200. The new property will feature a bistro and onsite chef, sushi station, fresh soup-and-salad bar, doughnut shop and expanded deli, meat and seafood departments.

And in addition to increasing its organic and bulk items, the store will offer more personal care products and maintain its drive-through pharmacy.

That project is still on the table, said Joe Bell, local manager of marketing and public affairs for Kroger's Delta Division, and should get under way in the coming weeks.

Plans for the Schnucks remodels will begin on Sept. 13 with four stores, which will be closed and stocked with Kroger signage and products. Those stores will re-open by Sept. 24 and the following week the remaining Schnucks stores will be closed and repurposed.

Full-scale renovations will be performed on each of the stores during the next three years.

Schnucks has 1,193 employees in the Memphis market and those workers will be allowed to interview for similar positions at the rebranded Kroger stores, Bell said. A Kroger job fair for current Schnucks employees will be held next week.

Schnucks has 10 stores and six Schnucks Express fuel and convenience centers in Shelby County, and two grocery stores and two fuel/convenience stations in DeSoto County.

In contrast, Cincinnati-based Kroger operates 109 stores and 68 fuel centers in five states under the Kroger banner in West Tennessee, Arkansas, Mississippi, southern Missouri, and southwest Kentucky. And there are more than 3,000 Memphis-area employees in Kroger's Delta Division, excluding those in its distribution center.

In total, the company counts 2,449 grocery retail stores in 31 states under nearly two dozen banners.

A little over a year ago, Schnucks leaders cited an oversaturated market and an underperforming economy as reasons behind shuttering the store at 1150 N. Germantown Pkwy. Schnucks had bought the 68,000-square-foot Cordova site — which originally opened in 1999 — when it acquired Seessel's in 2002.

The grocery closed on Aug. 28, 2010, but the nearby Schnucks Express gas station and convenience store at 1210 N. Germantown Pkwy. remained open.

Rumors of a Schnucks exit strategy intensified last month when the company abruptly halted its "Pump Up the Savings" customer card and fuel rewards program.

The company became involved in the fuel business when it entered the Mid-South market in 2002, eventually opening eight fuel centers in the Memphis area in what became its largest fuel rewards market.

The Schnucks exit is the latest chapter in the story of what was originally a locally owned establishment known as Seessel's.

Founded by Henry Seessel in 1858, the Seessel's stores remained family-owned until 1987 when Seessel's great-great-grandsons, Art and Jerry Seessel, sold the then-10-store chain to American Banaco Inc., a French holding company.

The following year the Seessel family bought the stores back, but within a few years they were up for sale again.

In 1996, Fleming Companies, an Oklahoma City-based grocery wholesaler and Seessel's minority shareholder, claimed the right of first refusal on any sale and challenged the attempt by Birmingham-based Bruno's Supermarkets Inc. to buy the stores.

Originally, Fleming planned to buy the stores and resell to Schnucks.

But a federal judge ruled in favor of Bruno's, which had acquired the stores and in 1998 the Boise, Idaho-based Albertson's bought the Seessel's stores for $88 million. Four years later, Schnucks acquired the company.

At the time of the deal, Albertson's was the No. 2 store in the area with about 15 percent of the Memphis market share, well behind Kroger with 39 percent, but slightly ahead of Wal-Mart, which had more than 11 percent.

Wal-Mart launched its Supercenter concept in 1988, entering the grocery store industry by offering items at significantly discounted prices. Today there are more than 2,900 of the stores across the country. And its Wal-Mart Market concept, which began in 1998 with groceries, pharmaceuticals, and general merchandise, today counts 183 stores nationwide.

"When we came into the Mid-South market in 2002 we felt it was a unique opportunity and we hoped to get a strong foothold there and maintain a strong presence in Memphis," said Lori Willis, director of communications for Schnuck Markets Inc. "Unfortunately, the Mid-South competitive landscape changed dramatically and there has been fierce competition from non-traditional grocery stores. We ultimately were forced to make the difficult decision to leave this market, which has treated us so warmly."

In addition to the Schnucks stores, the Tom Thumb subsidiary of Kroger is purchasing seven convenience stores in the Memphis area that are owned by Schnuck Markets. The sites will operate under the banner name Kwik Shop.

"We are pleased to enter this important market with our Kwik Shop convenience store banner," said Van Tarver, vice president of convenience stores for Kroger. "We will strive to operate stores staffed with great people who want to make your shopping experience as efficient and enjoyable as possible."

Tom Thumb Food Stores is a convenience store division of The Kroger Co. and operates 116 stores in Florida and Alabama.

Staff reporter Tom Bailey Jr. contributed to this story

LOCATIONS AFFECTED BY THE DEAL

Kroger counts 37 stores in the Memphis area and this deal will boost that number to 43. Two of the stores will replace smaller Kroger stores.